This month there was a fair amount of surveillance activity, and during
the month KBRA affirmed ratings on 93 classes and upgraded six classes
across 15 transactions. The upgrades were effectuated on two Freddie
K-Series transactions (3 classes), one floating rate deal (2 classes),
and one IO resecuritization (1 class). There were no ratings downgrades
during the month, and three ratings were withdrawn following the full
repayment of the related securities. In conjunction with the reviews,
five KBRA Loans of Concern (K-LOCs) were highlighted.

Loans with KLTVs ≥ 100% and ≥ 110% continued to rise in August, and
reached new record highs of 70.8% and 42.9%, respectively. The steepest
increase YTD was found in loans ≥ 110% KLTV. Full term IO exposure
declined for the fourth consecutive month to 22.9% on a trailing three
month basis and the combined percentage of full and partial term IO of
64.6% is the lowest it’s been since August 2014.

In the Publications Corner section, we also highlight our research
commentary entitled “A
Closer Look at Credit Bar-Belling”, which was released earlier
week. The report identifies how the increase in credit bar-belling has
masked overall pool leverage and introduces the KBRA credit bar-bell
indicator. It is becoming increasingly prevalent this year to see deals
with meaningful exposures to low leverage loans that skew overall pool
metrics, and August was no exception. One pool that priced in August had
a 6.7% exposure to low leverage loans. Had the exposure not been
present, the transaction’s KLTV would not be skewed and reported a full
3.8% higher, at 108.5%.

In our commitment to transparency, we updated our comprehensive set of
the statistics for our rated conduits along with this issue of Trend
Watch within the KBRA
Comparative Analytic Tool (KCAT).
The file enables users to compare data points from all KBRA rated
conduits.

KBRA is registered with the U.S. Securities and Exchange Commission as a
Nationally Recognized Statistical Rating Organization (NRSRO). In
addition, KBRA is recognized by the National Association of Insurance
Commissioners (NAIC) as a Credit Rating Provider (CRP).